Calendar spread options, WTI

by Jim Colburn • Tuesday, March 13, 2018

In early February, some deep out of the money put buying occurred in the April/May, May/June and June/July (also, the expired March/April)  0, zero, put option, probably by one trader… The buyer was expecting or hedging against the WTI curve slipping back into contango…  Here is a picture of the most open interest in spread options from the CME:

And here is a recent chart (barchart.com) of the April/May spread:

If we slip deeper into contango, I may have to revive my “Option Trade of the Year” award…

We discussed this trade in our March podcast…

 

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